Canadian Dollar Down on Rate Outlook

The Canadian dollar has been under pressure since the middle of September.  Bank of Canada Governor Stephen Poloz made things worse last week, when he told markets that rate hikes were data dependent and he intended to proceed cautiously.  Suddenly, the “sure thing” October rate hike became a “no-chance.”  rate move and the Canadian dollar sank.

Domestic issues weren’t the only thing undermining the Canadian dollar.  South of the border, Federal Reserve Chair Janet Yellen spoke of the dangers of keeping interest rates too low for too long. The hawkish language from the noted dove was enough to raise the odds for a December Fed funds to increase and boost the US dollar in the process.

Geopolitical concerns, at least those about nuclear war, have ebbed in recent days.  President Trump has shifted his insults from Kim Jong-un to the mayor of Peurto Rico.

October er opened with the greenback in demand.  Rising US Treasury yields and political strife inside the Eurozone contributed to the move.  The Spanish government resorted to rubber bullets and batons to drive home the fact that they were unhappy with the Catalonia region’s plans for a referendum on sovereignty.  Naturally, that just made things worse.  The prospect of civil strife in a Eurozone country undermined the single currency.

Sterling is trading at the bottom of its overnight range.  GBPUSD dropped from 1.3400 to 1.3302, undermined by Conservative Party infighting at heir annual conference, broad US dollar strength and weaker than expected September Manufacturing PMI. (Actual 55.9 vs. forecast 56.4)

The strong dollar and lack of fresh North Korea rhetoric have taken the shine off of gold prices XAUUSD closed at $1,279.50 on Friday and is now trading at $1.273.70.

Oil prices snapped a month-long uptrend this morning when prices broke below  $51.35/barrel and dropped to $51.74.  An International Energy Agency, Storage Market analyst, warned of a build in supply in 2018.

The Bank of Japan’s Tankan Report pointed to continued moderate economic expansion and improvement in foreign and domestic supply/demand conditions.  USDJPY climbed steadily, rising from 112.37 to 113.04 before retreating ahead of the New York open, supported by firmer Treasury yields.

The antipodean currencies were under pressure from the broad US dollar strength. AUDUSD dropped to 0.7796 from 0.7846 with the move below 0.7800, a bearish development.  NZDUSD fell from 0.7224 to 0.7169.but remained above support.

Sept 29./17 Oct.2/17
close open High Low
EURUSD 1.1819 1.1730 1.1841 1.1731
USDJPY 112.50 112.88 113.04 112.47
GBPUSD 1.3339 1.3305 1.3400 1.3302
USDCHF 0.9680 0.9709 0.9726 0.9683
AUDUSD 0.7843 0.7800 0.7846 0.7796
NZDUSD 0.7223 0.7178 0.7224 0.7169
USDCAD 1.2477 1.2523 1.2521 1.2470
GOLD 1280.73 1273.08 1279.88 1271.45
WTI 51.55 51.32 51.65 51.32

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